Mutual funds have been aggressively increasing their share in the country’s household savings, while bank deposits witnessed their share dropping. Industry insiders believe that the changing role of distributors as financial advisors will see better asset allocation in favour of mutual funds.
In the past five years, the share of mutual funds in household savings have gone up from less than two per cent to eight per cent as the assets under management for the month of February crossed Rs 18 lakh crore. In less than a decade, MF industry assets have grown five-fold and retail participation has been instrumental in this growth. Meanwhile, bank deposits shrunk their share in household savings to from 56 per cent to 41 per cent.
“Increasing inflation and falling interest rates have seen investors looking for other financial assets providing better returns. Typically people have been investing in bank deposits or physical assets like real estate and gold. In the past three to four years, mutual funds have grown to the size of 17 to 18 per cent of bank deposits,” said Milind Barve, managing director of HDFC Asset Management Company.
Availability of different financial assets providing different returns as per the risk profile also has led to a transformation of the role of mutual fund distributors and intermediaries into financial advisors.
“The markets are dynamic. Hence investment without advice is fraught with risks,’ he said. According to him, 85 per cent of mutual fund investments come as a result of an advice from an intermediary or financial planner.
Having started mutual fund distribution 11 months back, Geojit Financial Services has launched an online financial planning tool. The tool helps one allocate assets, taking the investor’s risk profile into consideration, in order to meet the financial goals. The company targets tech-savvy investors aged 28 to 45 years to utilise the online tool.
“We expect the online tool to be used by 10,000 clients in next three months,” said Satish Menon, executive director of Geojit Financial Services.
Mutual fund distribution currently accounts for seven per cent of the business and the company wants this to double in one year. “We are aggressively promoting systematic investments into mutual funds through our branches and franchisees. We have 200,000 SIP accounts now,“ added A P Kurian, chairman, of Geojit.
sangeethag@mydigitalfc.com